Public Bill Committee

[Mr David Amess in the Chair]

Clause 4

Amendment moved (this day): 34, in clause4,page3,leave out line 7 and insert—

David Amess: I remind the Committee that with this we are discussing the following: Amendment 25, in clause4,page3,line25,at end add—
Amendment 26, in clause5,page3,line33,leave out ‘report’ and insert ‘Bill’.
Amendment 29, in clause5,page3,line33,leave out from ‘report’ to end of subsection (2) and insert ‘identifying the preferred purchasers, and must deliver an oral statement to Parliament on the matter and lay an order on the proposed disposal which will be subject to the super-affirmative procedure under section 18 of the Legislative and Regulatory Reform Act 2006.’.
Amendment 30, in clause5,page3,line33,leave out from ‘report’ to end of subsection (2) and insert ‘identifying the preferred purchasers, and must deliver an oral statement to Parliament on the matter and lay an order on the proposed disposal which will be subject to the affirmative resolution procedure.’.
Amendment 27, in clause5,page3,line34,at end insert ‘which confers on the Secretary of State the powers to make the disposal.’.
Amendment 28, in clause5,page3,line35,leave out ‘the report must’ and insert ‘when laying the Bill the Secretary of State must report to Parliament and’.
Amendment 35, in clause5,page3,line40,at end add ‘and
Clause stand part.
New clause 3—Guarantee of inter-business agreement—
New clause 4—Guarantee of inter-business agreement (No. 2)—
New clause 8—Report on the future viability of the Post Office network—
New clause 9—Annual report on Post Office network to devolved government bodies—

Nia Griffith: I shall return to the discussion that we were having before lunch. We were considering paragraph (g) of amendment 25 and the reasons why we want a full understanding, before the mutualisation of the post offices, of exactly how the £1.34 billion investment will have been used to stimulate viability.

Edward Davey: Just before we broke up, I pointed the hon. Lady to page 19 of the policy statement, where that is detailed.

Nia Griffith: Indeed, I have in front of me the page to which the Minister refers, but the question in my mind concerns post offices’ viability. We are asking in paragraph (g) for a report on how the investment will have been spent, the value of any unspent budget and, most importantly, the progress toward the expected goals.
Our difficulty, as we explained, is that part of the money—indeed, it looks to be a rather large part, 48%—will inevitably be the three years’ continuation of the subsidy put in by the last Labour Government, £150 million or £180 million to 2012. The difficulty is how, with that amount, to make post offices viable to carry on after the mutualisation. That subsidy is part of their income and it helps them, but it does not change the problem that we all know we face, which is how to make the businesses more viable.
This morning, we touched briefly on the technology being put in and the network modernisation that will bring things up to date and make them more pleasant for customers and the people behind the counter, but that will still not create the business. Maybe one or two people will pop their noses in because they think that it would be nice to see what the spruced-up post office looks like, but it will not provide additional footfall, beyond the curiosity factor for a week or two.
The key question is where the business will come from. I note that the project costs are 5%; what that might mean, I am not sure. Perhaps the Minister can answer that. Our question is whether any of this money will be spent to make the network viable. Otherwise, people will be put into mutualised post offices whose profitability is questionable, and that is not something that anybody can countenance. The National Federation of SubPostmasters wants the Post Office to be a going concern, not the basket case to which Mr George Thomson referred in his evidence to us a fortnight ago.
Clearly, we need to ensure that post offices’ viability is good. We need not just a subsidy but a proper move forward to make them a going concern. That is why we want some information to indicate that: information about the programme’s anticipated goals and how it will work out in practice. That is what the people want who will be looking after post offices after mutualisation. The last thing they want is to find that they have been hived off or cut adrift without access to any Government subsidy, and that lo and behold, they face a closure programme on an unprecedented scale.

Damian Collins: Does the hon. Lady agree, based on what George Thomson told the Committee in an earlier sitting, that the network’s viability is not exclusively a matter for the Bill? There are many things that rural and urban post offices can do to improve their business, whether through merging with other local shops and businesses or developing out of franchises in the post office local network.

Nia Griffith: Absolutely. There are some very enterprising post offices. In Llangennech in my constituency there was a local supermarket just down the road from the post office and so the option to become a corner shop was very limited. Instead it became a gift shop with some very nice ladies’ jewellery. Yes, there are opportunities for post offices and that is certainly something that we want to look forward to.

Michael Weir: Does the hon. Lady agree that in areas like mine, that process has already happened? There are few stand-alone post offices. Indeed, under the last closure programme, the Post Office seemed to deliberately encourage stand-alone post offices to move into other local businesses. So there is a limited scope for that continuing.

Nia Griffith: Absolutely. The diversification programme has been very important and I will come back to that when I talk about devolved issues. Quite clearly it has had to happen already in our constituencies because otherwise the income coming in would not have been sufficient to have kept the place open. So, yes, a lot of diversification has taken place and certainly we have seen a lot of amalgamation or putting two businesses together. Another example in my constituency is Tycroes where there used to be a post office and a little supermarket owned by the same family. Obviously they have put the two together so that they can make economies of scale and interchange staff between the post office and the shop. We are all familiar with that type of picture.
Yes, of course there is a lot that post offices can do but the key issue is how we can get them to do that. There is a role there for the Government to spur them on and to demonstrate ways forward, such as some of the pilot projects that have been mentioned. To make sure that the Post Office is in a fit state for mutualisation, we want to have this report and to know about the progress that has been made, whether by local individual enterprise or a Government initiative, taking on board the diverse nature of the different types of post offices that we have.
I will not discuss all the amendments in the group because my hon. Friend the Member for Ochil and South Perthshire will do so. I should therefore like to move on to one of the new clauses which is directly linked to what I have been saying. New clause 8 requires the Secretary of State to report on the future viability of the post office network before the first relevant disposal is made in relation to Royal Mail. The report must include details of the inter-business agreement and plans for any new forms of business for the post office network. Clearly this is the real worry for post offices. Not only will they be mutualised, which they may welcome, but they will need to be viable. They are looking at three distinct streams of business and they are worrying about each one of them. Not one of them is secure.
We have talked about the enterprise. We have talked about the possible opportunities for post offices to develop as places of great enterprise. We are aware that the sub-postmasters are trying to get more business from the Department for Work and Pensions and we are also aware that there is no guarantee that they will retain their existing contracts on what are called the green giros. They have put forward some possibilities but we do not know whether the DWP will want to pay the post offices a viable price for some of the transfers that they are offering to carry out when the DWP itself has been closing front-line offices. There is the idea of the post office as a front room, a window on to Government, the place where people can access all sorts of different services: we would like to have more detail about that if it is really going to happen.
People are very worried. In fact, there is talk in the document about the local post office. That is an interesting concept, but it is frustrating if a person turns up at one of them and is glossily told that it provides 85% of the services, but of course the person wants one of the services in the 15% that is not available. They want to apply for something for which there is not a form. We had that kind of situation with things such as driving licences, where people had to go to certain post offices and not to others, and so on.
There is concern that the Government’s idea of the shop front will not necessarily come to fruition because of uncertainty about giros, the fact that we have not yet heard that sub-postmasters have had any commitment from the DWP for further services, and the fact that it can be frustrating if services are not available at every post office. That can sometimes detract from the availability of the service. People decide that they will not bother going there, they will go online—they do not know whether their post office down the road will have a service.
That is the issue with the Government part, but all of that makes it even more important that the IBA is in place. That is why the new clause asks for details of it. We have already mentioned the IBA, which is the vital link that guarantees the post office network one third of its business. Most people cannot conceive of a post office that does not have a letters and parcels service. The idea of a post office without postal services is bizarre, but a few years ago many would not have believed that rivals in the field would snap away from the Post Office the green giros or the TV licence contract which, of course, were lost.
Those are the issues that the Post Office faces. The Royal Mail provides income from not only the counter service but the many other parts of the IBA which involve things such as sorting office links. Many post offices, particularly those in the more far-flung rural areas, are dependent on that for a large proportion of the income that they receive.
All in all, we are asking for the report to make it absolutely clear to everyone exactly what will be in mutualised post offices. Most people who buy something want to know exactly what it can do, what its future prospects are and so on. That is really what we are trying to say. In order for the mutualisation to be successful, people will want to know that they have something that will potentially be a success story, not an unmitigated disaster with a huge amount of blame falling on it for having to close post offices, and with people possibly feeling that it is a financial liability.
I would like to say a little about new clause 9. The essence of the new clause is that the Secretary of State should report to devolved bodies in the same way that he would report in new clause 8, to which I have just spoken. What is the involvement of our devolved bodies? It is considerable. Many of us will know that post offices in Scotland and Wales have been able to benefit from funds that were allocated by the Welsh Assembly and the Scottish Executive. It is clear, if we are talking about mutualisation, that there is another stakeholder: the investment in the post office network that has been made by the devolved institutions.
In Wales we have had two programmes. First, the post office development fund provided £4.1 million in capital grants to 99 sub-post offices in the most deprived and isolated areas of Wales between 2002 and 2004.
Secondly, the post office diversification fund, which opened in December 2008, has also been open to post offices from the whole of Wales. Sub-postmasters and sub-postmistresses have been able to apply for capital grants of perhaps £5,000 or so for small projects, or £20,000 for some of the larger projects.
The first two rounds of the post office diversification fund attracted 214 applications for grants, and 140 applications totalling £2.7 million were supported. It is clear that a significant investment has been made by the Assembly Government in the post office network. I can give you an example from my constituency, where New Dock Road post office received £50,000 for refurbishment. It is a well used post office, which is at the heart of the community. People can be seen queuing outside at about 8 o’clock on pension morning, and the queue stretches right down the road. Residents enjoy the post office as a social outing, and both the current postmaster and the one who was there at the time of the redevelopment have a reputation for caring well for their community and looking after their customers well.
Clearly, the Assembly Government have given a large amount of money. It seems reasonable that they should receive a report of what is happening to the post offices in the mutualisation process, and that they should have some idea of the returns that the post offices can make. When the Post Office is required to report on how it is getting on and what is happening, the Assembly Government should have the opportunity to have that report laid before them. We have mentioned the other bodies that are involved, such as the London assembly.
We think that the Scottish Parliament, the Welsh Assembly, the Northern Ireland Assembly and the Greater London authority should have the opportunity to see exactly what has been going on. They should be able to see exactly what the plans are, and how the investment that they have made meshes with the investment that the Government have made and the plans that the Government have for the future viability. It is important that such a year-on-year report should be established, detailing exactly how matters have worked out and how the network is progressing. For that reason, we propose these two new clauses in addition to the amendments to which I have just spoken.

Michael Weir: It may be appropriate that the Minister is wearing a red tie today for his clause IV moment. Clearly, this is one of the major issues in the Bill. The general public have serious concerns about splitting the Royal Mail delivery system from Post Office Ltd. Indeed, what future awaits our post offices in the brave new world of privatisation?
Having spent many of the past 10 years opposing the sweeping post office closure programmes of the previous Labour Government, it is somewhat strange to be on this side of the Committee perhaps joining them in opposing the present Government’s plans.

Edward Davey: I confirm that the Government have no plans for a closure programme such as the previous one.

Michael Weir: The Minister is getting ultra-sensitive; I did not suggest that he had such plans. I was about to explain my concerns about the current plan. I note the promises that have been made on the record that no more post office closures will occur, and given the evidence that we have heard I am fascinated to see how that will be carried through. I wish the Minister luck in that; I hope that he is correct. I continue to oppose post office closures in my constituency and I successfully opposed some proposed closures under the last Government. If the Minister tries to close any, I shall certainly lead the opposition again—I hope successfully.
I have some other concerns. At the outset, I have to say that it would be fine if Post Office Ltd stayed in Government ownership provided that there were no closures. If the Government proceeded with a mutual, many of us would support it provided we were assured that it would be established on a proper footing. However, I am not clear from the clause about various factors, and I would like to explore them in more detail.
Throughout our debates, we have been assured by the Minister that there will be greater delivery of Government and local government services through the Post Office, which will help it to diversify. That was touched upon in evidence by Paula Vennells, managing director of Post Office Ltd, who said:
“In terms of what is in the Bill, what is important for Post Office is that we maintain our strong relationship with the Royal Mail Group. Royal Mail Group is over a third of our revenues but the rest of our revenues come from Government and we will be looking to Government to grow the revenues in terms of front-of-office services through Government and also through financial services. Some 80% of customers now can access other bank accounts through the Post Office, so there are tremendous opportunities”.—[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 5, Q6.]
That is fine as far as it goes, but it raises a couple of questions.
I would like to press the Minister slightly on how much Government and local government business may be possible. I do not distrust the Government’s commitment, and I know that he said at a previous sitting that he is in discussion with various Whitehall Departments and agencies, to see exactly what business can be put through the Post Office. However, I foresee some purely practical problems.
In my area of Angus, most burghs have established local access offices offering a front-office service for all local authority services. In Abroath, Brechin, Kirriemuir, Forfar and Montrose they are situated at most 100 yards or so from a post office—and in Kirriemuir, Forfar and Montrose, those are the only post offices in those large burghs. It is difficult to see how there is likely to be greater ability to deliver those local authority services through the post offices in those burgh areas, given the investment that has already been made to set up the access offices. It seems that the Government and the Scottish Parliament would be the only ones to provide services that required such delivery, but I am not clear how much of a service could be provided by the post offices. It would be useful if the Minister were to give an indication of his thinking on the subject.
I welcome the possibility of such services being delivered in smaller village areas, but, frankly, in many areas the post offices have already gone. I wonder whether, under the Post Office local model, it would be possible for staff who run the shop, pub or whatever along with the post office to deliver more detailed services.
On local post office services, the hon. Member for Llanelli touched on the question of mutuality. In Scotland, a great deal of help has already been given to local post offices, through a diversification programme. That has helped post offices with their diversified businesses. Indeed, I previously cited a post office set up in a fish and chip shop. That programme has helped post offices to get greater business, as the hon. Member for Folkestone and Hythe said. The problem that I mentioned in an intervention was that the process was well advanced in many rural areas in Scotland, the area that I know best, and it is difficult to see how much more can be done.
As we heard, the Scottish Government have introduced a business bonus scheme as well as a diversification programme. It helps all small businesses, but particularly post offices; depending on the rateable value, they pay less rates or no rates. I refer to what George Thomson of the National Federation of SubPostmasters said in evidence:
“When it comes to the devolved assemblies in Scotland, Wales and Northern Ireland, in many cases they have been given 100% rates relief to help them stay in that community. I know that in Scotland, for example, some people are saving £4,000 or £5,000 a year, which is a massive help—saving £100 a week—to keep their business on the local high street.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 33, Q76.]
That is a considerable investment in post offices, as the hon. Member for Llanelli mentioned. On that basis I support new clause 9. The Scottish Parliament and devolved Assemblies have considerable input into trying to deal with that problem and to ensure that local post offices continue.
The hon. Member for Llanelli touched on mutuality. Again, as I mentioned earlier, there is a great deal of support for that concept, but we are unclear about what the reality is. In our evidence session, it was clear from witnesses that that there is no way that the Post Office Ltd could ever be a mutual organisation, prior to being put on a sound financial footing. The underlying theme of the evidence was that it was a long way from that point now and that the pathway taking it from where it is now to where it could become a mutual was not at all clear. If the Government are to persuade hon. Members and the general public who use and value post offices, as well as the people who run them, that a mutual is the way forward, they have an awful lot of explaining to do and a lot of detail to go into.
We have talked about the relationship between the Royal Mail and Post Office Ltd. There was a great deal of support for that from the witnesses from whom we heard. However, the relationship between, say, two companies in the same group having an agreement to run together and the realities of a privatised Post Office are different, because the Government are determined to push down the costs to the taxpayer of continuing to support Post Office Ltd.
As has been mentioned, at present Post Office Ltd gets fully one third of its business through the inter-business agreement. We have heard a great deal about that and about the length of the agreement that could be entered into between Royal Mail and Post Office Ltd. I accept, to an extent, and I am sure that the Minister will say, that it is impossible to write a long-term agreement into a Bill. There may be legal problems with doing that. The Minister will no doubt mention that Moya Greene spoke about that during the evidence session, saying:
“For me it is unthinkable that we would not have a very long-term relationship with the Post Office. Here is a group of people—the best and strongest network in the country, by any yardstick, with 11,900 outlets—who are committed to and want to sell our products…To me it is unthinkable that we would ever have anything but the very strong relationship that we have now with the Post Office. I admire our other partners like WH Smith; of course I do. But that is not the Post Office.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 18, Q42.]
Leaving aside the fact that in many places WH Smith is the post office now, because of what happened under the previous programmes—many post offices were moved to become effectively subsidiaries of other businesses and are not stand-alone businesses—I am slightly concerned by that remark. However, my real concern about what Ms Greene said was that a relationship between a fully privatised Royal Mail and a Government-owned and mutual Post Office Ltd would be different from a relationship between two companies that are both members of the same group.
Ms Greene may have a considerable attachment to Post Office Ltd, but would a new owner of the business necessarily feel the same way? What happens when the commercial profit motive really kicks in? How much will sentimentality govern the actions of Royal Mail in such circumstances?

Gregg McClymont: I am listening closely to hon. Gentleman, who makes a strong case. Will he comment on the asymmetry of power that will exist following the privatisation of Royal Mail relative to Post Office Ltd?

Michael Weir: I will leave it to the hon. Gentleman to talk about asymmetric power, because it is not in my notes. I understand what he means, which is basically the point that I was already making about a large, privatised and profit-driven Royal Mail. I do not agree with the privatisation, but the rationale behind it is to make the new company look for efficiency savings and to cut costs. Is it conceivable that the new company will not look at how it can do that in its relationship with Post Office Ltd? I think that was the hon. Gentleman’s point. Any newly privatised company will look at all its relationships and contracts to see where costs can be cut. I am sure that we will discuss the universal service and its problems later.
Paula Vennells caused me some concern during her evidence when she said:
“I do not see other retailers as a particularly serious threat, because Post Office has an enormous amount of expertise in this area”.––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 17, Q42.]
As I have said, she mentioned WH Smith, but the business document’s proposal in relation to the Post Office local model is not dissimilar to what is happening in many areas. It is part of the evolving Post Office, and the idea of a stand-alone post office service has already gone.
On Second Reading, I asked the Minister whether there was any precedent elsewhere in the world for splitting the delivery service from the post office network, but I did not receive an answer. I have done some research and have been unable to find an example, but I have discovered an interesting situation in New Zealand. During the 1980s and ’90s, New Zealand changed the structure of its postal service. Prior to that, its system seems to have been much like the old Post Office Corporation. It had three roles: postal services, telecommunications and banking. The New Zealand service, as I understand it, was split into its three constituent parts. Interestingly, however, it was not privatised and, as far as I can ascertain, it remains in public ownership and returns a fairly healthy profit. In parallel to the splitting up of the business, a full liberalisation of the New Zealand postal services was carried out, which led to the entry of a large number of new entrants into the market. At first, the entrants were relatively local, but eventually larger businesses entered the market, one of which was Fastway Post. This example is integral to our discussion not because it was a mail delivery company, but because of what happened next.
We have heard much about the need for the IBA. The Minister and the chief executive of Royal Mail have said that it would be inconceivable that anything but Post Office Ltd would be used by Royal Mail. Indeed, if I remember correctly, the Minister was somewhat dismissive of the idea that an operator might want to use a major supermarket for the delivery of postal services. However, that is what has begun to happen in New Zealand. Fastway Post, which appeared initially to be a business post provider, has moved into the wider market. It is now involved in what is effectively a franchise operation in which shops can provide the services of post offices. It is not unlike the current system of Post Office Ltd and its small business providers. Fastway Post’s website states that it has outlets throughout New Zealand and it issues an invitation to retailers:
“Interested in reselling Fastway Post products and services? Establish a postal service from your store. Fastway Post provides retailers with a range of products and services that are in turn sold to businesses and domestic customers throughout New Zealand.”
The website also gives details of how to become a Fastway Post outlet and, under “Retailer Support”, states:
“Fastway Post is not merely a distributor of product, we help you sell, promote and merchandise our products and we provide ongoing support via our helpdesk, staff training and support materials”.
It goes on to list various matters in which it helps its franchisees, including mail deposit and clearance:
“The Fastway Post mail box is a great added value service for your customers. It clearly identifies the retail outlet as a provider of postal services. Cleared Monday to Friday by Fastway Couriers.”
There is a photograph of one of its post boxes on the website and it is very similar to a Royal Mail post box.

Edward Davey: I am grateful to the hon. Gentleman for informing me of this experiment, not least because it had not occurred when I made my two trips to Wellington and met Elmar Toime, the chief executive of New Zealand Post at the time. It strikes me that what the hon. Gentleman is describing can happen, and already does happen, in the UK. We have retail outlets such as Mail Boxes Etc. that perform services of the sort that he describes as being provided in New Zealand. It does not seem to me that the Bill will change anything in relation to what he describes.

Michael Weir: I profoundly disagree with the Minister.

Edward Davey: Why?

Michael Weir: If the Minister waits a minute, I will explain—he is really impatient. He has pooh-poohed the idea that somebody could set up an alternative route for delivering services, rather than through Post Office Ltd. Fastway Post demonstrates that that can be done. It happens to have been a competitor of New Zealand Post that did it, but there is nothing to stop Deutsche Post or TNT taking over Royal Mail and deciding that to cut costs it will look at alternatives for delivering services. It might decide to franchise out. The document from the Department for Business, Innovation and Skills describes post office local and says that it provides
“access to post office services in an open plan arrangement alongside the retail till for all the hours the shop is open.”
That basically describes a franchise operation within existing shops.

Edward Davey: I stand by the point that I made in the previous debate about the notion that a private competitor might set up a network of 11,500 post office outlets to compete with the post office network. Is the hon. Gentleman seriously suggesting that that has happened in New Zealand or that it might happen here?

Michael Weir: I am merely pointing out that the Minister is wrong to state that nobody would think of doing that.
 Mr Davey  rose—

Michael Weir: The Minister is getting over-excited. The Committee has heard ample evidence that only 4,000 post offices are profitable and that only 7,000 are needed to meet the universal service obligation. The Minister may laugh, but it is quite conceivable that a privatised Royal Mail, or somebody who takes over that service, might decide that that is all it needs to run a universal service and that it will utilise a supermarket chain, or similar, to deliver the services. That would make inroads into the viability of Post Office Ltd as a stand-alone business.

Gregg McClymont: The hon. Gentleman is painting a plausible picture. Does he agree that it would be better if the 11,500 post offices were retained in statute by access criteria, rather than at the whim of the Government?

Michael Weir: My overall point is that we cannot leave the future of Post Office Ltd hanging on the fact that the current management of Royal Mail have a sentimental attachment to it. That is what the Bill asks us to do. Nothing in the Bill writes into statute that there will be a continuing business or that existing post offices will continue. The Minister must consider this matter because he has given an assurance that there will be no more closures and that we will continue with 12,000 post offices, yet he is pressing through a Bill that may lead to the undermining of that post office service. We do not know what is a few years down the line.

Edward Davey: The dispute between the two of us may be a philosophical one, because I do not believe that Governments can write into legislation that a business will exist in perpetuity because Parliament has decreed it. That is not how businesses work. Businesses do not work through sentimentality, because this place has all the legal power to decree to businesses; they work because they are commercially viable, with services going through. One does not put that in the Bill, but in a Post Office policy statement, which we have done.

Michael Weir: The Minister seems to be throwing Post Office Ltd to the wolves, to survive or otherwise in the commercial environment in which a fully privatised Post Office would be found. I do not know if someone will come along with an alternative to Post Office Ltd, but it has happened elsewhere—no postal market is exactly the same as the UK’s and other things might happen, but that is a possibility. Nothing in the Bill guarantees the future of the post offices, which is what we have been arguing about for all these years, through the closure programmes—fighting them. We have been arguing for the future of our own post offices, in our own communities. The Minister is saying that the previous Government were awful in closing all those post offices—they were, and I do not deny that—but he is also saying that the Post Office will, effectively, be left to the market. That is what will happen.

Gregg McClymont: Does the hon. Gentleman agree that the Dutch and Germans do not find it philosophically impossible to write into statute provision for access points? Germany is a Christian Democrat country, yet why are the Liberal Democrats talking about what I described the other day as a Thatcherite overreaction?

Michael Weir: If access criteria are written in for the post offices in Germany and the Netherlands, I do not see why that cannot be done in this country. We must seriously consider, as the Bill goes through Parliament, exactly how we ensure the future of our post offices. I become very worried indeed when I look at what has happened elsewhere and at the potential future of our post offices under the Bill.
Going back to what Paula Vennells said in her evidence, I remind the Minister that she talked about financial services. The Government have rejected the idea of a post bank as one of the ways forward, but interestingly, one of the things that helped the New Zealand postal service get back on its feet and turn itself around was Kiwibank. Guess what Kiwibank is—basically, it is a post bank, but the New Zealand model.
We could do lots of things to help the Post Office, but my problem is that they do not seem to be in the Bill. If new clauses 3, 4 and 9 were pressed to a vote, I would support them, because they are important in putting things into the Bill. If the Minister is to convince us not to, he has to come up with a lot more than the sentimentality of Royal Mail towards Post Office Ltd. In my experience, there is little sentiment in big business when the chips are down. Once Royal Mail is privatised and sold on to Deutsche Post, TNT or whoever, the present chief executive or the present Minister, neither of whom will be around for ever—no offence to the Minister—are not sufficient grounds on which to base the future of our post office network, which so many of our constituents rely on.

Gordon Banks: I support all the amendments in the group, surprisingly enough. I want to talk briefly about amendments 34 and 25, which my hon. Friend talked about, but I wish to make some additional points, before moving on to amendments 26, 29, 30, 27, 28 and 35, and new clauses 3 and 4.
Amendment 25 has similar objectives to those of amendment 16, but relates to the Post Office instead of Royal Mail. I will not go through from proposed new paragraph (a) to whatever, but a couple of points are important to pick out.
Proposed new paragraph (a) would secure the placing of at least one representative of those directly employed by the mutualised Post Office or its successors on the board of the new company. That is important, because the Minister seemed to say just now that the business would be mutualised without any real level of information being passed to us, so we think that is some kind of insurance policy and a safeguard. Amendment 25 would deliver a natural avenue for developing relationships between management and the work force in a way that would strengthen the company moving forward. From the employer’s side, that would be a sign of faith in the work force as one of the biggest assets that any company can have, and that would be carried through by amendment 25. As in amendment 16, amendment 25 does not restrict such representation to only one, but rather at least one, directly employed representative, which we think is very important.
Proposed new paragraph (b) mentions the headquarters of the business. One could argue about whether it is more important for Royal Mail or the Post Office to have headquarters in the UK. Sadly, we can all see the possibility of Royal Mail not having its HQ in the UK, which fills us with some dread, but the possibility of the Post Office not having its HQ in the UK would fill us with even more trepidation.

Damian Collins: As has been discussed, WH Smith operates many post offices as a franchisee, including the main post office in Folkestone in my constituency. If WH Smith were bought by a foreign company with its headquarters overseas, should it be made to give up those franchises?

Gordon Banks: No—that is not the essence of amendment 25; the essence is the headquarters, not the operation. It is important that the Post Office HQ is retained within the UK, and I will develop a couple of points, similar to those that we developed on amendment 16, as to why it is important and why we hope that the Minister will take our arguments on board this time.
Having the headquarters in the UK protects the integrity of a brand that is typically British, typically representative of the United Kingdom and typically representative of our high streets. Amendment 25 would bind any successful mutual to recognise the importance of the HQ location as an integral part of the way forward. It is also important to recognise the earlier point made by the hon. Member for Angus in relation to Royal Mail, because the same argument works here. We need to keep not only the HQ jobs, but the management jobs of the Post Office within the UK. We need to do that not only so that the work force can relate to the management, but so that people can work their way up through the company in a way that would become more difficult if the HQ were overseas.
My hon. Friend the Member for Llanelli has made some good points on proposed new paragraph (d), which I will not reiterate, but I will say that the Committee members need to read her representations.
The resulting ballot that would result from amendment 25 is important—it is as important here as it was in other amendments—but so too would the Bill that would result from amendment 25. I would like to say a few words on that. We will be talking about bills, bills, bills and bills in this part of the debate and I am sure the Minister will follow.
We have seen from the evidence, as the Bill stands, that there is no need for the Secretary of State to report to Parliament at all. He can fulfil his obligations by simply approving the issue or transfer. That is not onerous. He just has to approve it. He does not have to report to anyone.

Edward Davey: I am trying to follow the hon. Gentleman, but I thought that clause 5 introduced a clear statutory reporting requirement to ensure that Parliament is informed of any move to mutual ownership. Is he trying to make some other point? Clause 5 is clear on the reporting requirement.

Gordon Banks: What we are saying is that our amendment relates to clause 4, which says that the Secretary of State can fulfil his obligations once he
“has approved the issue or transfer.”
If there is some misunderstanding between the Government and ourselves on how this would work, we would argue that acceptance of amendment 25 would nullify that misunderstanding.

Edward Davey: I am just re-reading clause 5. I cannot see that it can be much of a misunderstanding. It is entitled, “Report on transfer of interest in a Post Office company to a relevant mutual”. Subsection (2) is absolutely clear:
“As soon as reasonably practicable after making the direction or granting the approval, the Secretary of State must lay before Parliament a report on the issue or transfer in question.”
I may be missing something. If I am misunderstanding what the hon. Gentleman says, I hope that he will be clearer.

Gordon Banks: What I am trying to say to the Minister is that I think the amendment makes that clearer, and that is our argument. It gives some added strength to the Bill.
The Committee will remember the history lessons that we heard during the debate on amendment 16. I will not repeat those here and now, but they are relevant to this amendment as they are relevant to Royal Mail. Paragraph (g)(ii) would require the Secretary of State to outline how he proposes to utilise the £1.34 billion that he has committed to the Post Office from 2012. My hon. Friend the Member for Llanelli touched on that, but there comes a point in time when we need to know what that money will be used for. My hon. Friend asked that question today. We have not had the answer. What level of new product development would that £1.34 billion be responsible for? That is my concern.
We find that the Government want to engage more with the Post Office for the delivery of Government services. We have heard that that is an ambition. Could we find some of that £1.34 billion being used to develop those new products in a way that actually uses that £1.34 billion instead of another departmental budget? Might we find that the Post Office pays for some of the development work for any potential movement that might relate to additional services from, say, the Department for Work and Pensions? We would like to see a commitment that the £1.34 billion is not used in that way and that, if the DWP delivers services through the Post Office, the DWP budget is responsible for the development of those services, and the £1.34 billion for the Post Office is kept for other development work, so that we are not talking about using the £1.34 billion—the Minister is looking confused, I will try and make it simple for him—that is committed to, as a route for subsidising DWP budgets.

Edward Davey: I can assure the hon. Gentleman that BIS has no intention of subsidising DWP and I am sure DWP has no intention of subsidising BIS. I would simply say that if new services are put forward by any Government Department, unless there are issues that prevent a competitive procurement, those Whitehall Departments have to go through a proper procurement process and Post Office Ltd would have to compete with them in the way that happened under the previous Government, because those are European procurement rules.

Gordon Banks: I do not doubt that, but my concern is to ensure that if Post Office Ltd were successful in attaining some of these potential new services—we really do not know what they are; we hear whispers and gossip as to what they might be—the Post Office Ltd budget would not be responsible for developing them. If they come from the DWP, the DWP budget should be responsible for developing them for delivery through the Post Office, because there will obviously be some cost-benefit advantage to DWP for moving them from wherever they may be at present and placing them with the Post Office. I want to get that point clearly on the record.
Amendment 25 is quite large, but it is important because it delivers a level of security checks and balances and transparency that we think the Bill does not have. If the Minister feels that amendment 25 is too onerous, we will give him as an alternative amendment 34. It has a requirement for the Secretary of State to simply approve the issue of transfer of ownership, after which it receives the support of both Houses of Parliament by way of simple approval. That is a very simple mechanism, which should not worry the Minister too much.
Amendment 26 calls for the Bill to be amended to leave out the word “report” and insert the word “Bill”. This is familiar ground; there are similarities to earlier amendments tabled to this clause and amendments tabled to other clauses. None the less, the amendment is just as important and is just another alternative for the Minister to consider.
Amendment 26 would ensure that the Secretary of State had to produce a Bill on the disposal, presumably via mutualisation, of the Post Office. At present, the Secretary of State gets his power to dispose of the Post Office in this way from this Bill, provided that he lays a report before Parliament. My hon. Friends and I do not consider that that is appropriate and we feel very much that, just as amendment 16 would require in the case of Royal Mail, a Bill with the relevant details of the mutualisation programme should come before Parliament and receive Parliament’s consent.
Members of the Committee may ask why we are going to such lengths again, but I would respond by saying that we have yet to see any real evidence of what the mutualisation programme would look like and there is not much information for the Committee on its structure. We do not know what is being mutualised. Is it the conceptual business, is it the bricks and mortar, or is it both elements? How will that mutualisation work when the Post Office is in the premises of a chain, such as WH Smith, as has been mentioned by the hon. Member for Folkestone and Hythe? Again, we do not know. We would argue that a Bill with those complexities explained, including how the mutualisation will work alongside a private sector business such as WH Smith, is necessary. Furthermore, we do not know how the Post Office is to be mutualised, or indeed when.
Although I am not against mutualisation, I want to say at this point that mutuals can fail too, and we will discuss that when we consider later amendments. However, for this new mutual to have the best chance of survival, we must ensure that Parliament has the ability to scrutinise the position reached by the Secretary of State.
Amendment 29 is less onerous for the Minister. By the end of this clause, I am sure that he will recognise that my generosity knows no bounds, because we are giving him so many options that he really should be spoilt for choice. Christmas is coming early to the Minister.
However, amendment 29 would place a duty on the Secretary of State to deliver an oral statement to Parliament, on which he could then be questioned. Thereafter, the Secretary of State must lay an order on the proposed disposal, subject to super-affirmative procedures under section 18 of the Legislative and Regulatory Reform Act 2006. The Committee will recall the use of this level of scrutiny being included in the content of amendment 17, which we discussed earlier. It is just as important now as it was then, and it is also important to remind Members of the level of scrutiny that the amendment would impose on the Secretary of State’s proposals.
In essence, the procedure demands that there is a 60-day period following the laying of the order by the Minister, during which the relevant parliamentary committees may report on a draft order, or either House may make a resolution with regard to the draft order. The Minister must have regard to such reports and resolutions, and to any other representations made about the draft order. Once that 60-day period has expired, if the Minister wishes to make an order, with no changes, he must lay a statement and he may then make an order in the terms of the draft, if it is approved by a resolution of each House of Parliament.
Amendment 30 is less onerous than amendment 29, but it would still require the Secretary of State to make an order in terms of the draft, only if after 40 days of the order being laid before Parliament the draft order has been approved by a resolution of each House of Parliament. So again there will be scrutiny, but it will be less demanding.
Finally in this little group of what, seeing as the Minister is keen on giving amendments a name, I will call “the accountability amendments”—amendment 27 would simply clarify that, by making the report that is already contained in the Bill, the Secretary of State indeed has the power to make the disposal, so that in essence it is that report that confers the power on the Secretary of State and not the Bill that we are discussing today.
Again, although we would be less happy with that proposal, it acknowledges that the Secretary of State must return to Parliament and produce a report on the disposal in relation to the agreements reached during the negotiation process before he receives the power to dispose.
Then there are amendments 28 and 35. The primary aim of amendment 28 is to ensure consistency throughout the Bill. Members of the Committee will note that the concepts in amendment 28 closely mirror those in amendment 26, so I will not bore the Committee too much by repeating what has already been said.
However, briefly, the clause as it stands means that the only duty on the Secretary of State when transferring a Post Office company to a relevant mutual is that he must lay a report. The vagaries and arguments against that approach are well rehearsed on this side of the Committee and we believe it is more appropriate for the Secretary of State to lay a Bill in the first instance, as we have already argued.
Amendment 35 sets out an additional duty on the Secretary of State when reporting to Parliament that the report must be subject to the approval of both Houses on the basis of a motion in the name of the Secretary of State. Again, that would allow for parliamentary scrutiny and transparency in the process—something that we have been trying to deliver through many, if not all, of our amendments to date. It is my firm belief that both Houses deserve a debate and a vote on the proposals before the Secretary of State has the power to mutualise any Post Office company, and we have provided many options for the Minister to deliver such an accomplishment.
New clauses 3 and 4, which have been touched on briefly, are hugely important. Again, new clauses 3 and 4 are quite similar to each other. They focus on the IBA between Royal Mail and Post Office Ltd. Labour Members would be happy to see an indefinite IBA between the two organisations. However, recognising from the Minister’s earlier comments that he would be most unlikely to agree to that, we again, in the spirit of flexibility and mutuality, have provided him with two options to try to rectify what we consider to be a problem. I believe that the current IBA has about three and a half years left to run, and in light of the total sell-off of Royal Mail the situation needs some attention very quickly, hence the tabling of these two new clauses.
Witness after witness has recognised the importance of the IBA, from Moya Greene who—as referred to in this section of the debate—said that it was unthinkable that the link would be broken, to George Thomson and even the Minister. Separating the Post Office from Royal Mail is an unprecedented step and is something that Mr Thomson said the Government must get right. We would support that position; the Government must get it right if they are going to do it. We do not think that the Bill gets it right because it makes no commitment to any long-term IBA. The National Federation of SubPostmasters expressed its satisfaction with the last five-year deal because the business was still going to be under public control. However, that will not be the case now. So we certainly do not want a five-year deal; we want something much longer than that. We have no idea what thoughts are going through the Minister’s head in relation to what he considers to be tolerable.
There needs to be a level of security for sub-postmasters that is not contained in the Bill. Many sub-postmasters are running businesses and they need to see something beyond three and a half years. That period is now doubtful because, at the end of it, the organisation may no longer be in public ownership. Therefore, for that individual investment—both human and financial—to carry on, there needs to be something in place on a longer-term basis to enable post offices to survive.
The federation is pushing hard for a 10-year deal, and I urge it not to settle for anything less. Ten years is the lesser period mentioned in the two new clauses we are talking about. However, arguably, if that is added to the three and a half years that are already left to run, it provides a considerable level of commitment to post offices across the country. As I have mentioned, we suggest that there should be an indefinite IBA or a 15-year period, which is referred to in the other new clause that we are discussing. A 15-year period is much better and would allow a real opportunity for the newly mutualised organisation to look ahead with some degree of surety to the future.
We have heard throughout the Committee, in witness contributions and line-by-line scrutiny, that a third of the footfall and revenue that comes to post offices is through this agreement. It is because of the IBA with Royal Mail, and we want to keep that as a basis for building the work up in the future. I do not want to see a privatised Royal Mail changing its high street outlets to, for example, a deal involving all our high street banks, or to the banks in conjunction with supermarkets. The hon. Member for Angus has commented on the fact that although we may not see it as a likelihood now, that does not mean that it will not occur. We would like to see some security for an extended period of time—the 15-year period—to ensure that, during that time, post offices retain the identity of Royal Mail’s high street outlets.
We all want to see the longevity of post offices in our community. One of the best ways to ensure that that happens is to make sure that the IBA is delivered for an extended and extensive period of time, and we can do that by accepting new clause 3 or new clause 4. Without that, we are again putting our faith in the management of Royal Mail, who tell us that they see it as inconceivable that there would not be a link between Royal Mail and the Post Office. The Minister has alluded to something similar. However, the current management of Royal Mail and the Minister may not always be there, so we need something in the Bill that creates security for businesses. Remember that that is what these operations are; they are businesses and they need to look forward. We need to use the IBA, which provides a third of the footfall and revenue into post offices, as the basis to move forward over the 10 or 15 years.
I hope that the Minister sees the importance of securing that extended period as a fundamental building block for the future. Anything else that the Government want to do in relation to developing new products through the Post Office will be playing catch-up, and in some ways, it will all be put at risk—if that core third of the business, a third of the footfall, or a third of the revenue were not there, because of the long-term relationship with Royal Mail. It would be detrimental to the development of new products, whether they come from the Government or within Post Office Ltd, if that long-term arrangement did not exist. I hope that the Minister will take the strength of the argument and feeling from Opposition Members on board, as well as the strength of the representations that I am sure he has had from the federation on the importance of a long-term agreement. I am interested to hear what he will say, particularly on that point.

Edward Davey: This has been an interesting debate, centred on the relationship between post offices and Royal Mail after their ownership has been separated by the Bill.
Clause 4 ensures that two extremely important elements of the Government’s policy are in place. First, it introduces new ownership restrictions to allow for the introduction of new capital to Royal Mail while ensuring that the Post Office is not for sale through a separation of ownership. Secondly, the clause also opens up the possibility of a move in due course to mutual ownership of the Post Office.
The amendments fall roughly into three broad categories. The first group seeks to add preconditions that must be met before ownership of the Post Office and Royal Mail can be separated. The second group seeks to add further preconditions for the transfer of the ownership of Post Office Ltd to a mutual, and the third group seeks to increase the scope of the Post Office’s annual reporting requirements. I want to address the three types of amendment, but before I do so it has become my custom to name each group of amendments. This is a long group, so it has been particularly difficult to assess, and the tone of the debate has been particularly interesting. In a previous sitting, the hon. Member for Ochil and South Perthshire accused me of talking down Royal Mail.

Gordon Banks: I did not.

Edward Davey: I have the record here, if there is any doubt. It has seemed at times that Labour Members have tried to talk down the Post Office, and that is why the group should be known as the Sergeant Frazer amendments. It is as if we were all “doomed”, and the post office network were doomed also—[ Interruption. ] I am going to be told that it is not Sergeant Frazer; I am happy to be corrected.

Damian Collins: I believe that the Minister is absolutely right; it is Sergeant Frazer from “Dad’s Army”. Does he agree though that Labour Members seem to oscillate between two views? One is that the Post Office is so fundamentally flawed that without enormous support it would totally collapse, and the other is that it is so lucrative and attractive that any number of private providers will want to come in at any time to open their own post offices.

Edward Davey: My hon. Friend makes an astute point. I am told from a Member in a sedentary position that it is Private Frazer; people reading the record will obviously want to know that.

Michael Weir: It seems to me that the Minister’s response was blindly optimistic; it has no basis in fact whatsoever.

Edward Davey: The hon. Gentleman typifies my point about the Private Frazer notion behind the amendments. Let me help him, Mr Amess, by dealing with many of his points, and hopefully cheering up Labour Members.
Looking first at the concerns about the separation of the Post Office and Royal Mail, new clauses 3, 4 and 8 suggest that taking Post Office Ltd out of the Royal Mail Group of companies will put the relationship between Post Office Ltd and Royal Mail, and therefore the post office network, at risk. That is the main charge that we face. I have stated throughout the debate that I believe that that is absolutely not the case, and I am not alone. I take hon. Members back to the witnesses that we heard just two weeks ago. The evidence from Richard Hooper, Consumer Focus and Postcomm shows that they all strongly support the separation of ownership of the two businesses. We had the independent expert—first employed by the previous Government—the leading consumer representative body and the regulator all telling us that they thought that the separation of the two businesses was a good idea, and I was heartened by that.

Gordon Banks: Does the Minister not also agree that Mr Thomson, in his submission, suggested that the measure was not without its dangers, and that everyone had to make sure that the Government got it right? In discussing the group of amendments and new clauses, we have been trying to say that it is important that the Government get this right, because it is not without risk.

Edward Davey: I think that I can agree with “it is important that the Government get this right”, and I can also agree that George Thomson and the National Federation of SubPostmasters more generally have engaged with the Government as we have developed the policy and the Bill. I do not suggest for a minute that they do not have concerns about individual details, but I am heartened by their overall approach, by how well they have engaged, and by how they have welcomed the £1.34 billion of investment, the model of mutualisation—which they were helpful in developing—and some of the proposed new services. I am glad that the hon. Gentleman has brought Mr Thomson into the debate, and I am sure that we will hear more of Mr Thomson’s contributions, and those of his colleagues, in future Committee sittings.
Why are these different, independent people so convinced that a separation is a good idea? It is because they look at the facts and at what happens operationally. These two businesses are reliant on one another. That is not because they are in the same corporate structure; they work well together. Post offices carried over 3 billion transactions from Royal Mail last year, and a long-term contract will continue because of the overwhelming commercial imperative for the two businesses to continue to work together, as they do now.
Why would Royal Mail wish to withdraw its business from the Post Office? When giving evidence to the Committee, Royal Mail’s chief executive, Moya Greene, called the network
“the best and strongest network in the country, by any yardstick”—[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 18, Q42.]
She is absolutely right. The Post Office offers unparalleled coverage across the length and breadth of the country. It offers a broad range of services—postal, Government, telephony, financial and others—and it is unsurpassed by any global comparator. As a result of the wide social and economic role that it plays in the hub of so many of our communities, the Post Office is unique in this country. I have looked across the world to find a parallel, and I do not believe that any post office network in any other country plays the combination of roles that the Post Office plays in this country.

Gordon Banks: Again, we are hearing the well-intentioned words of the Minister. He quotes Moya Greene, the chief executive, and says that there will be a long-term agreement. If such an agreement is to exist, put it in the Bill. That will undo any doubt that there may be for a prospective bidder, and any doubt that we may have about the Government’s intentions or the likelihood of the IBA lasting the length of time that the Minister suggests it will.

Edward Davey: Labour Members do not seem to grasp the fact that Government ownership, regulation and legal fiat did not stop 7,000 post offices from closing under the last Government, even though their 1999 White Paper promised that the then 19,000 post offices would play a crucial role. They took away Government services.

Nia Griffith: Will the Minister give way?

Edward Davey: I will, but I want to make a point and I hope that the hon. Lady will respond. The last Government undermined the post office network. Sorting out the future of the post office network is not a question of Government ownership, regulation and those sorts of things; it is about making it more viable, and ensuring that it is in a strong place, so that it can be a strong partner with Royal Mail, the Government and other operators.

Nia Griffith: Will the Minister explain why we have a figure of 4,000 post offices and a figure of 7,000 post offices? Do any of the figures that are suggested as being what is required for a network have any value? Will the Minister expand on that and explain how he would make 11,900 post offices viable? That figure does not appear at all.

Edward Davey: I think I understand what the hon. Lady is saying. The figure of 4,000 has been quoted by a number of hon. Members as a suggestion of the current number of commercially viable post offices. She is right—that is the position that we have inherited. We inherited a post office network that not only saw 7,000 post offices closed, but has only 4,000 post offices that remain commercially viable. Working with Post Office Ltd, sub-postmasters, and all those who care about the post office network, we intend to turn the situation round. The idea that it can be turned round by passing a regulation or a law, quite frankly, does not come from the real world.

Gregg McClymont: Will the Minister give way?

Edward Davey: I will, but I first want to give way to the hon. Member for Angus, who has been trying to intervene. I do not think that people are living in the real world if they think that one can turn the Post Office round simply by legislation.

Michael Weir: The Minister is very good at just dismissing concerns. Surely he must understand that the concern here is that much of what is needed to make Post Office Ltd viable has to do with Government putting more business its way and having other businesses involved in the Post Office. Let us look at the matter from the other side: if there were a privatised Royal Mail provider whose sole business was mail provision, what would it want from the Post Office? It would want something that provided the mail services that it needed—something like Fastway in New Zealand or, in many ways, something not unlike post office local.
The figure of 4,000 refers to main post offices, as I understand it, where all services are provided. However, there is a real danger of them being chipped away at the side, with a private provider looking only at services that it really needs, which could be provided by someone else.

Edward Davey: One of the reasons why I am confident that our approach will mean that we do not need to have the closure programmes that we saw under the last Government is that we are taking a realistic and commercial approach to the matter, albeit within a public sector or mutualised model. The post office local model that the hon. Gentleman talked about in his speech, and which he referred to just now, is a key part of that, as we said in our post office policy statement. When someone looks at that statement and the results coming from that experiment, they will begin to see why we think it is such a good model.
One of the clear findings coming from more than 50 pilots out there—in urban, suburban and rural areas and in different parts of the country—is that the average opening hours have increased by six hours a day. If someone is operating a retail network and trying to provide services and win contract bids from Government, Royal Mail or someone else, and if they are able to provide the network and on average are open for an extra six hours a day, they are operating more commercially. They are enabling customers to have greater access.
The people whom we are talking about—the hon. Gentleman’s constituents—will, under our proposals, have greater access to the post office network, yet I have heard no welcome of that. All I have heard is the Private Frazer approach. I have heard no welcome of the fact that the Government, working with POL, are not only putting in £1.34 billion—a major investment—but getting to grips with our appalling inheritance from the Opposition. Making sure that post offices are open longer reduces queues and increases access, so when the post office network tenders for contracts with a Department, Royal Mail or whoever, it will be in a strong place to win those contracts, not just because it can compete on price, but because it can compete on service.
I do not know what world the hon. Member for Angus has been living in, but the world of service at some—not all—post offices is not as good as it should be. That is why the sentimentality we sometimes hear is so misplaced. I hear from my constituents that they have to queue for too long, and that the post office is not open when they are away from work. I hear from them that they have to go to the post office in the lunch hour because it is open neither before work nor after it, and they have to queue for very long in that hour. It is not surprising that people are not going to post offices. We have inherited a disastrous model that is not providing the sort of service that people have come to expect. I am confident that we will turn around the business and ensure that it provides services that people want, with a level of customer service that people are used to in the 21st century. That is why it will be a financial success, and will transform the problems that we have inherited from the Labour Government.

Michael Weir: I do not know where the Minister lives, but I live in a rural area. I live in the real world, and I have seen what has happened to post offices over the past few years. I can also see what might happen under the Bill, though he seems determined to ignore it. He talks about longer hours; many Tescos are open for 24 hours. How will that help? Again, he is blindly optimistic that everything will be okay on the day. I cannot speak for the Labour party, but I am looking for some realisation that we must ensure that our post offices remain open, and I am not getting it from the Minister.

Edward Davey: I think that the hon. Gentleman did get it from the Minister, but just does not like it. We are piloting the post office local model. We want to put money behind it, and it is part of the post office policy statement. I will tell him what the market research tells us. The hon. Member for Ochil and South Perthshire, or perhaps it was the hon. Member for Llanelli, complained that post office local does not have all the services that they want and has only 86% of the full suite of post office services, forgetting that many post offices do not have the complete suite now. The market research shows that 94% of customers are satisfied with the overall experience of going to a post office local, and 82% are satisfied with the range of services. I refer the hon. Member for Angus to pages 12 and 13 of the post office policy statement, which gives more details of the market research. I am happy to read it out to the Committee, but it has been published and is there for people to see.

Tom Blenkinsop: Can I take it from the Minister’s comments that he is confident that 11,500 post offices will remain open?

Edward Davey: What I do know is that the business agreement reached with Post Office Ltd for the £1.34 billion—the contract made with Government—requires Post Office Ltd to keep a post office network of 11,500 post offices. That is a big commitment by this Government in tough financial times, and I think that it speaks volumes for our commitment.

Gregg McClymont: That is a welcome assurance, but I am sure that the Committee will know that it is a time-bound commitment. If the Minister was so confident about the future of those post offices, I suspect that he would have no problem writing it into statute, as they do in Germany and Holland, which have the most successful mail services in the world.

Edward Davey: I am glad that the hon. Gentleman mentioned Germany, because we have had some discussion about Deutsche Post, as hon. Members will remember. Until that intervention, he had desisted: I thought that he had seen the light about the reality of Deutsche Post. He seems to think, as he told a Scottish newspaper, that our model is very different from the Deutsche Post model because in Germany, 30% is still held via a state-owned bank. For the record, so that he is absolutely clear, what he fails to appreciate is that the German legislation for Deutsche Post contains no legislative restriction requiring the German Government, either by bank or by direct shareholding, to keep any shares. In other words, Germany uses exactly the model that we are proposing. The Deutsche Post model, which he is trying to use against us, is exactly the model in the Bill. I am sure that he will write to The Scotsman to correct the record. Will he?

Gregg McClymont: That is an interesting question. I did not tell The Scotsman anything. I think that the Minister will find that that comes from the proceedings of this Committee. I will read closely his point about Deutsche Post, but as things stand, the state has a share of 30.5% in Deutsche Post. That model is very different from the one that he proposes. However, I will go away and read his additional remarks with interest.

Edward Davey: I hope so. I want to return to that point, because the hon. Gentleman and other Labour Members seem to think that businesses are rescued by legislation. I point again to what Moya Greene said and why she said it, because their fears and concerns—their Private Frazer moments—seem to be based on the idea that Royal Mail would not use the country’s largest network, which has now been modernised, transformed and invested in, and which will be open for longer hours. They think that Royal Mail will say, “Do you know what? We’re not going to use it. We’ll let our competitors in. Wouldn’t that be a good idea?” That is effectively their concern.
I do not believe that Moya Greene’s successor and Royal Mail will be that stupid. I doubt that they will be stupid enough to rebrand Royal Mail Consignia, for example, which happened under the previous regime.
I have a lot of confidence in the people in Royal Mail and in the board of Post Office Ltd, and I believe that when they are separated they will continue to work together because they know that it is in their commercial interest to do so, not because something is written into the law. Moya Greene said that
“it is unthinkable that we would ever have anything but the very strong relationship that we have now with the Post Office.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 18, Q42.]
She is absolutely right. It is worth noting that the chairman, Donald Brydon, told the Committee in evidence that before any privatisation of Royal Mail, a continued long-term commercial contract will be in place between the two businesses for the longest duration that is “legally permissible”. That is a very strong pledge. He said that not for sentimental reasons, but because he is a business man and knows that it makes commercial sense.

Gregg McClymont: Am I right in saying that the Minister will have no idea what is in the contract?

Edward Davey: The hon. Gentleman is certainly right to say that my predecessors in the previous Government will not have seen the inter-business agreement currently in force between Post Office Ltd and Royal Mail, and he is absolutely right that neither I, nor my Department, will be party to any agreement negotiated between Post Office Ltd and Royal Mail.

Gregg McClymont: I thank the Minister for that answer. Does it follow that there could be stipulations or clauses in the inter-business agreement that would work to the disadvantage of Post Office Ltd of which the Government would know nothing? For the Government to talk in such optimistic terms about the IBA when they do not know what will be in it is quite a leap.

Edward Davey: The hon. Gentleman is in danger of making a circular argument, but not for the first time. All I say to him, in strong terms, is that Post Office Ltd is hardly going to negotiate terms of a contract that are against its interests.

Gregg McClymont: But the point is that Post Office Ltd will be in a weaker position, relative to Royal Mail Group; it will be a much smaller organisation and will be less powerful than a privatised Royal Mail. That was the point about the asymmetry of power that was referred to earlier. It is stretching credulity to believe that Post Office Ltd will be able to negotiate a contract on a level playing field with a privatised Royal Mail.

Edward Davey: The hon. Gentleman might find it stretching, but I do not, for the reasons we have been talking about in Committee. It has, as Moya Greene said,
“the best and strongest network in the country, by any yardstick”.—[Official Report, Postal Services Public Bill Committee, 9 November; c. 18, Q42.]
It is simply not the case that that somehow makes it a minnow. If the hon. Gentleman is trying to put himself into the mind of a future chief executive of Royal Mail—not Moya Greene, as she has pledged on the record her support for the proposal—does he really think that Royal Mail would leave a vacuum for competitors to enter? I just do not see that happening in the real world.

Gordon Banks: The Minister is painting a picture that indicates that we on this side of the Committee are scaremongering, but I want to take him back to what George Thomson told the Committee in evidence:
“On separating Post Office Ltd from Royal Mail, it is unprecedented and we have to get it right… We need security for sub-postmasters; they have £2 billion of their own money invested in this business. If you were a company investing £2 billion in a PFI to build a school or hospital, you would get a 21-year contract. I am not asking for a 21-year contract, but, by God, I am asking for a 10-year IBA contract.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 39, Q80.]
That is from someone who sees the value of the inter-business agreement from both sides, and that gentleman appears to have some concerns, so it is not just scaremongering from this side.

Edward Davey: The hon. Gentleman will know that as the Minister I have talked an awful lot to George Thomson and his colleagues in the National Federation of SubPostmasters. I am aware of his concerns about the IBA and it is his job to voice those to Ministers in his role heading that organisation. However, as I have said, the regulator, Consumer Focus, and Richard Hooper, who are not all on the same side and do not have a vested interest, agree with the Government that separation is sensible. That flies in the face of the hon. Gentleman’s point.

Gregg McClymont: I am trying to remember Consumer Focus’s evidence. Am I right that it favours statutory provision for access points in the context of a separate Post Office Ltd?

Edward Davey: I do not remember, but no doubt the hon. Gentleman will find the evidence for us. I remember clearly that Consumer Focus supported separation.
Having shown that I cannot see a commercial reason for Royal Mail and Post Office not continuing, let us examine what has been proposed. Let us assume that Royal Mail might be desperate to get out of using the post office network and that we will have to find a way to bind it in—even though Donald Brydon has said that it intends to have the longest contract that is “legally permissible”.
The new clauses seek to put the contract or inter-business agreement on a statutory basis, requiring a minimum duration of 10 or 15 years. I am unaware of any statutory precedent for requiring particular commercial terms between two independent businesses. I would be interested if Opposition Members could find such a precedent. It would be odd for a Government to dictate detailed contractual terms to two independent businesses. That is why we are not attracted to the new clauses.
The Opposition proposals only serve to reiterate why the Government should not impose on commercial negotiations. Contracts of the duration that Opposition Members are seeking would not necessarily bolster the commercial partnership between the two businesses, as they argue, but could harm it. A 15-year contract that charged Royal Mail extortionate prices while offering Post Office Ltd no indication of the volume of business it could expect would be no use to either business. A 10-year contract that was economical for Royal Mail would satisfy new clause 3, but could mean that each transaction lost loads of money for Post Office Ltd. Any proposal that might jeopardise Post Office Ltd’s commercial interests cannot be accepted. I hope that the Committee will reject the proposals.

Gordon Banks: To take the Minister’s words at face value, he seems to be arguing against a 10-year IBA. Is he saying that irrespective of whether it is in the Bill or something to be agreed with the national federation, he is against a 10-year IBA?

Edward Davey: There is no difference between us on whether Post Office Ltd and Royal Mail should be able to negotiate a 10-year IBA if that is what they want. The difference is about whether the Government should impose such a deal on Post Office Ltd and Royal Mail in the Bill. As I have said, there is no statutory precedent for that. I have also made it clear that neither the previous Government nor this one have become involved in the negotiations between two commercial companies. Let us take a flight of fancy and imagine that the Committee could create the commercial contract, including all its details. It would be utter nonsense to say that we could get it right.

Gordon Banks: The Minister seems to be suggesting that a 10-year deal can be done, provided that it is not required in the Bill. We are not saying anything about the content of the agreement other than the number of years it should last. If a 10-year deal will be viable when privately negotiated by Post Office Ltd and Royal Mail, that is no different from our proposal. We are not saying what the agreement should be, but that it should last at least 10 or 15 years.

Edward Davey: The point that I am making is that stipulating the duration in the Bill misses the point. One negotiates the details, not the duration, of a contract. In many ways, the duration may be a small matter for the two parties. I echo the very important words of Donald Brydon, who told the Committee that, before any privatisation of Royal Mail, a continued, long-term, commercial contract will be in place between the two businesses for the longest duration that is “legally permissible”. That is an extremely strong pledge by the chairman of Royal Mail and I do not see why the Opposition are not reassured by it. Perhaps it has something to do with “Dad’s Army”.

Tom Blenkinsop: Surely, as a Liberal Democrat, the Minister will recognise the asymmetry of certain recent negotiations, especially in the formation of the coalition Government. He must have also witnessed, or been privy to, commercial negotiations in a previous life. Considering the size of a privatised Royal Mail in negotiations with a mutualised Post Office Ltd, any longevity in the IBA between the two will come at the cost of access points.

Edward Davey: First, I believe that the Post Office will be a big player as an individual company, because it has the largest network. I do not therefore accept the Labour party’s efforts to talk down Post Office Ltd. The hon. Gentleman invites me to reflect on the negotiations that formed the coalition and whether they involved asymmetry. However, tempting as it is to comment on that point, I think it would lead me into difficult waters and that you would rule me out of order, Mr Amess.
Negotiations for an inter-business agreement are best left to the businesses, which know far more than we do. They know their customers, markets, services, products and past historical relationships. The best contract for both businesses is likely to come from their work together as they understand and negotiate the complex interaction between the pricing, the volume of the business, the duration and many other factors. The idea that we should put that into law, given the lack of any precedent and the danger of challenge in relation to anti-competitive practice and so on, is absurd.

Gordon Banks: The Minister has not grasped the fact that the issue is not the difficulty of Post Office Ltd and Royal Mail in their present formats negotiating an IBA. The issue is that the present IBA will end after Royal Mail has become a fully privately owned company that may well have a different set of criteria from the present Royal Mail. By asking for 10 or 15 years, my hon. Friends and I are arguing in favour of preserving the business as it enters privatisation, not as its empire currently stands.

Edward Davey: The chairman, Donald Brydon, said that there would be a new or refreshed IBA before privatisation and separation, and that it would last
“as long as is legally possible.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 19, Q49.]
That is the third time that I have made that point, because I think it is a very important part of this debate. Legislation is not the appropriate place for commercially sensitive terms to be debated. The terms of such a contract will be commercially sensitive, and I would have thought that the idea that we put them on the face of the Bill, discuss them and give succour to the competitors of the post office network is the exact opposite of what the Opposition are trying to achieve. I do not accept that point at all.
I have been really impressed when I have met sub-postmasters throughout the country and by how the NFSP has engaged with the issue. I know they have concerns about this but I think they also see the amount of money that the Government are investing, the support for mutualisation and the proposals in the policy statement on new services, and they have taken succour from that and from what Donald Brydon told the Committee.

Gregg McClymont: Will the Minister give way?

Edward Davey: I will just finish a few more points and then I am happy to take some more interventions. What some people fail to understand is that the Government are not party to the current arrangements and will not be party to them in future. We are not changing anything. This is what happens now. While I have not seen the existing contractual arrangements, for the reasons I have given, I am aware that they stretch to more than 100 pages of highly specific, commercially sensitive material. I think it is right that the experts, the businesses and their advisers, negotiate on those and agree the commercial relationship between them for the long term, rather than us trying to do that in a parliamentary Committee.

Gordon Banks: I want to tease something out. Can the Minister take his last statement a little bit further? Will he tell the Committee that he has no involvement with, no interaction in and no say on the length of time that any IBA will be drawn up for and therefore will not be involved in any negotiations with anyone on the subject outside the Committee?

Edward Davey: Yes. The Government’s job is to create the conditions in which the businesses can flourish. That is what we are hoping to do through the Bill. It is what we are hoping to do by getting private capital into Royal Mail. It is what we are hoping to do through the major investment that we are making in Post Office Ltd. Post Office Ltd is modernising its branches and will have the money to do so. As we heard from Paula Vennells, the Post Office managing director, it is developing the post office local model, a model where branches offer customers much longer opening hours. It is therefore putting itself in a very attractive place to be a very strong partner to Royal Mail and, indeed, to Government Departments.

Gregg McClymont: The Minister has mentioned a partnership. With regard to the relationship between Royal Mail and Post Office Ltd and the asymmetry of power, I found out recently that the Post Office Ltd board has six people on it, four of whom are from Royal Mail. The notion that these two organisations are relatively balanced in their respective reach, strength and power is pushing it a bit. Can he confirm that that is the make-up of the board?

Edward Davey: What I can confirm is that the hon. Gentleman has just made the argument for separation. The problem for Post Office Ltd and thus for the post office network is that it has never been the first consideration of the board of the Royal Mail Group. It has always played second fiddle. Those who are running the Royal Mail Group are worried about the letters business, because it is the biggest part of the business. They are worried about the parcels business and so on. They are worried about how the regulator affects that by its decisions. Their focus and management attention is on that. Inevitably, the post office network comes next or even later. Having a separate company where the board is solely for Post Office Ltd and is focused on the strategic needs of the business will make a really big contribution to the successful future of the post office network. That is why I believe the regulator, Consumer Focus and Richard Hooper backed the proposal for separation.

Gordon Banks: The Minister seems to have said that the management of Royal Mail Holdings have not done their job correctly, because they have taken their eye off the Post Office. He surely cannot mean that.

Edward Davey: I did not say that. I said that while Post Office Ltd is within the Royal Mail Group, the management of the Royal Mail Group have many other things to consider. Because these are very different businesses, there is a danger—this may well have happened in the past—that Post Office Ltd has not had the full attention and focus that it requires. I believe that separating out will avert that danger.

Gregg McClymont: I note that the Minister did not disagree with me about the Post Office Ltd board make-up. He may well have a point; I can see why in the past the two groups’ being in the same organisation could have created issues with Post Office Ltd’s performance. Putting them into contractual negotiation where Royal Mail is so much more powerful—even if the Minister’s plans for Post Office Ltd’s growth come off—makes it difficult for Post Office Ltd. We on this side of the Committee would be much more comfortable with what he has said about spinning Post Office Ltd out from Royal Mail if he put statutory provision for post offices in the Bill. Then some protection for Post Office Ltd would exist in that relationship, and we could have the advantages of the separation to which he has referred.

Edward Davey: The hon. Gentleman is whistling one of his favourite tunes, and I am sure we will discuss that issue when we reach the relevant clause. I am looking forward to that debate, and it is something that he and his colleagues quizzed me on when I gave evidence to the Committee. I am keen to move on to the other amendments, because time is pressing. Does the hon. Member for Angus want to add something?

Michael Weir: The Minister is making the case that Royal Mail and Post Office Ltd are part of the same board and that insufficient thought has been given to Post Office Ltd. Why can he not accept that if they are split and a privatised Royal Mail focuses exclusively on its letters business, as he has discussed, there is a real danger that it will consider alternatives to Post Office Ltd?

Edward Davey: Throughout the debate, I have quoted the chief executive and the chairman of Royal Mail, and I strongly believe that Royal Mail would be taking leave of its commercial senses to vacate the network of 11,500 post offices and allow its competitors to come in there. That is exactly what its competitors want it to do, and that is exactly why it will not do so.
I now turn to the second category of amendment, particularly amendment 34, amendments 25 to 30 and amendment 35. They seek to put further preconditions on any move to mutual ownership of the Post Office. Chief among the preconditions are those of amendment 34, proposed new subsection (8)(g) of clause 4 in amendment 25, amendments 26 to 30 and amendment 35. Those provisions seek to require the passage of a further Act of Parliament, a further order subject to either the affirmative or super-affirmative procedure, or the approval of both Houses of Parliament of a report on the transfer before any transfer to mutual ownership can be made.
I do not believe that those requirements are necessary, because we are now scrutinising a Bill that contains the necessary provisions. Clause 7 lays down clear parameters for any transfer to mutual ownership, and it will ensure that the mutual operates within those parameters in the longer term. Those parameters recognise the Post Office’s unique social role. They will ensure that the Post Office continues to serve the public benefit, irrespective of whether it is owned by the Government or by a mutual.
There seems to be some misunderstanding about these provisions. The hon. Member for Llanelli is worried about the lack of an asset lock. She quoted Peter Holbrook, the chief executive of the Social Enterprise Coalition, who has suggested that it is necessary to ensure that mutuals cannot be demutualised and the assets appropriated by private owners. Clause 7(4) requires the Secretary of State to be satisfied that a mutual Post Office Ltd cannot dispose of property or rights, if it is inconsistent with its purpose of acting for the public benefit by promoting the use of post office services. That is an asset lock of exactly the sort that Peter Holbrook wanted and, alongside the ownership restrictions in clause 4, it ensures that further legislation would be needed before any demutualisation could take place. I want to make it absolutely clear that the post office network could not be sold off privately. A mutual post office network could not be demutualised without another piece of legislation. That is what I call a lock, and I would have thought that Opposition Members would appreciate that it is a lock. That is why I do not think that their desire for some more preconditions before a transfer to mutual ownership is necessary. We have the policy before us, we have the framework for either a 100% Crown-owned Post Office network or a relevant mutual and that is what we should be debating rather than further barriers and further preconditions.

Tom Blenkinsop: I thank the Minister for giving way and agree with him that we should be debating what type of mutual is being proposed; in the Bill, there is not any sort of proposal about any variables or options for the mutualism. Would there be front-door mutualism, in that there would be buying-out of independent post office holders? Would there be back-door mutualism, where there would be a redistribution of profits from independent post offices to pay for currently unviable post offices? Would the mutual itself be able to sell off assets—in other words, 7,000 other post offices—to pay for the existing network?

Edward Davey: I think that I answered that question just a second ago, or at least the last part of that question. However, let me make clear what is in the Bill. I am keen that hon. Members look at what is in the Bill, because that is what we are here for. The Bill sets out a very clear legislative framework for future mutual ownership, which seems to me to be the right approach.
We are building on that approach by the way in which we are engaging with the mutual sector to get its ideas about the best specific model for Post Office Ltd. We have asked Co-operatives UK to explore how a mutualised structure could work best in the post office sector. Once it has reported, which we expect to be by April 2011 although it may be a bit later, we are committed to a full public consultation before a decision is made to move to a mutual structure.
So, first, we will have a consultation led by the mutual sector itself and not by Government, so that the sector can consider all the different options, whether it is a John Lewis-type model, a more co-operative society-type model or some other model. The sector will come up with options, having discussed those options with all the key stakeholders, particularly the National Federation of SubPostmasters but other key stakeholders too. Then the mutual sector will come back to Government and, assuming that we get Royal Assent for this Bill, we are making an absolute commitment that we will consult on our proposals for taking forward a mutual structure.

Nia Griffith: Perhaps the Minister will explain the relationship between “viability” and “mutualisation”. In other words, we can talk and consult about wonderful schemes, but the question in everybody’s mind will be, “Is it going to be viable?” Will the Minister explain what criteria he will have for that viability before the mutualisation process can take place? Also, will he say what sorts of guarantees he will be looking for?

Edward Davey: I am very happy to do so. The hon. Lady is absolutely right, to the extent that there cannot be an unviable mutual. The thing about a mutual is that people volunteer to be part of it; we cannot force them to be part of it. Therefore, it grows organically.
People will not sign up—be they sub-postmasters, or community mutuals that exist at the moment—to be part of the national mutual, which is proposed in these clauses, if that national mutual is a loss-making organisation, and we would not expect them to do so. That is why I have not suggested at any stage that mutualisation is the process by which we will make the post office network more viable. I believe, as I have said at length during our exchanges today, that the way to do that is by getting more Government services through the network and by ensuring that the Government are putting in serious investment to modernise the network.
Through that process and through ideas such as post office local, we will get the post office network—this incredibly valuable social and economic institution—to be viable and put it in a situation where it could be mutualised. We will not mutualise it by imposing a model, because the nature of mutualism is not about the top-down imposition of models in a Bill or by Government fiat. We have to take people with us, which is why we have set out the consultation process. The process is the first not to be led by the Government, and it involves the Government responding to the mutual sector’s ideas.

Nia Griffith: I am glad to hear the Minister accepting our arguments about the need for viability, which is what a great deal of what I have said this afternoon has been about. Can he give us any idea of the time scale in which he hopes that the Post Office might achieve viability?

Edward Davey: We gave an indication of the time scale in the Post Office policy statement. We say at the end of paragraph 63:
“We believe that the Post Office could be a mutual by the end of this Parliament.”
I believe that the process of improving viability, as I described, would enable mutualisation by that time.
I am glad that the hon. Lady sought that clarification, because I do not want people to get the impression that we can move to a mutual structure very rapidly. An awful lot of work has to be done before that would be possible. However, it is a realisable, achievable goal, to which we are very committed and which we want to see happen, ideally, within the lifetime of this Parliament.

Nia Griffith: As we discussed earlier, the three-year funding programme, which will presumably be in place from 2012 to 2015, concentrates largely—nearly half of it—on the running subsidy, while other amounts are for modernisation and the introduction of technology. However, the question remains, what is the actual investment in things that will make most post offices more viable? What plans are in place so that, by 2015, there will be a realistic prospect that the post office network will be viable and therefore in a state to mutualise?

Edward Davey: We hope that investment in the 4,000 main post offices, which we talked about in the policy statement, will enable them to generate more revenue than they can at the moment. The reforms of the post office local model will assist as well—we talk about taking 2,000 post offices along that route in this time period.
I do not know if what lies behind the hon. Lady’s question is whether we will have transformed the whole network during that time scale, but we probably will not have. It takes quite some time to transform everything—the issues are really quite big—but we are moving at speed despite that challenge. Transforming a network that has been shrinking year after year—so much in the past 13 years, leaving just 4,000 financially viable post offices, according to different experts—cannot be done overnight. It is a long job, which will require a shoulder to the wheel and all the tools in the box. The prospect of mutualisation might galvanise people’s attention and enthusiasm—as might the investment, post office local, the involvement of local authorities as we described in the Post Office statement or the new services—but transformation will require a whole-Government approach. That is one of the reasons why I am spending so much time talking to Ministers in other Departments, focusing on how we can bring life to the front office for government model, which we talk about in the policy statement.

Gordon Banks: To go back to a point I made earlier, is it correct that Post Office Ltd and others will have to compete for those services?

Edward Davey: I think that I answered that earlier, in response to the hon. Gentleman. He is absolutely right that we must have a normal procurement approach, unless there are certain security considerations, which is one of the reasons why we need to invest in the post office network, so that it can be a good competitor for the contracts. We are confident about what we are doing, whether on a processing role for the Post Office, identity verification or the pay-out technology now being implemented. Those generic roles will be attractive and will put the Post Office in the lead in such competitions.
Before moving on, I wish to clarify a point that, when I listen to debates, it seems is not clear in some people’s minds. When we talk about mutualising the post office, we mean mutualising Post Office Ltd. That is the overall national body that operates the franchises, holds the intellectual property, manages the contracts with Royal Mail and Government Departments and holds the discipline codes and so on. We are not saying to private individuals who have invested their capital in their businesses that we will suddenly take those businesses away and put them in a mutual. The proposed model is a national mutual model that will have beneath it at the local level many private businesses, as it does now. At present, 97% of post offices are run by private individuals or groups, and that will continue. They will have the option to become part of the national mutual of Post Office Ltd. I hope that I have made that clear, and that my explanation will have been of assistance to those that had not quite grasped the point.
Before turning to the other aspects of amendment 25, I wish to make a general point about the amendment’s use of the word “purchaser”. I do not know whether it was the hon. Member for Llanelli or the hon. Member for Ochil and South Perthshire who wrote the amendment, but I make it clear that the Post Office is not for sale. There will not be a purchaser of the Post Office. Clause 4 explicitly states that the only owners of the Post Office can be the Crown or a relevant mutual within the parameters of clause 7, to whom ownership of Post Office Ltd will be transferred by the Crown.
I turn to the other preconditions to a transfer sought under amendment 25. Proposed subsection (8)(a) seeks a written commitment that an employee representative should be on the board of the mutual; and proposed subsection (8)(f) seeks a majority vote by staff and stakeholders in favour of a transfer. The amendment rightly places importance on the engagement of the work force and stakeholders in the operation of the Post Office, and I commend it. Any move to mutual ownership must put the views of employees, sub-postmasters, business partners, communities and customers first. However, I reiterate what I said in previous debates, that we should be careful about being prescriptive in legislation on the governance structure of the mutual.
As we heard in evidence, we should not impose a rigid mutual structure on the Post Office from the top down, which is what the amendment would do. That is why we have asked Co-operatives UK, the national trade body for co-operatives, to consider the proposal in detail and to consult sub-postmasters, particularly the National Federation of SubPostmasters, staff and so on. There are a number of questions that we want answered. For instance, we want to know precisely who would be the members of a mutual, and how the governance of a mutual should work. After Co-operatives UK has sought the views of staff, stakeholders and experts and reported back to the Secretary of State, we will then have the public consultation to which we are fully committed.
I assure the Committee that there will be nothing mandatory about mutual ownership. For example, if a member of staff does not want to engage in the operation of the business, nothing will oblige that staff member to join committees or to vote on resolutions. It would be a shame if they did not become involved, but it is not mandatory.

Gordon Banks: I wish to be clear about a mutualised Post Office Ltd in which some outlets buy into the mutualisation and some do not. Will there be any impact on the ability of those that do not buy into mutualisation to deliver services?

Edward Davey: It would be quite wrong if a sub-postmaster employee were to be penalised for not being involved, but I would have thought that there would be incentives to become involved. The hon. Gentleman is trying to tempt me to prejudge what Co-operatives UK decides and what will be said in the public consultation. Experts on mutualisation say that we have to engage first with those who are going to be part of it, and not impose it top down. I will not stand here and give a set of rules. That would be inappropriate. I believe that we have a framework that safeguards the public benefit, as well as the assets through the asset lock. We have the framework required for a mutual structure; now we want to engage all the key stakeholders and the public.
Proposed new paragraphs (d) and (e) of clause 4(8) seek to make a public consultation an explicit requirement. I can only repeat that we are committed to a consultation. Proposed new paragraphs (b) and (c) seek to ensure that the headquarters of the mutual Post Office will be located in the UK. I do not think that the provisions are necessary, as it is highly unrealistic to think that a mutual Post Office would be headquartered anywhere else. After all, it will be a mutual to promote the UK public’s use of UK post offices. The point of mutual ownership is that the key stakeholders—staff, sub-postmasters, customers and business partners—are more engaged in the running of the business. All those groups will be UK-based and have a vested interest in the headquarters being in the UK. It is a flight of fancy to think that a mutualised post office network would want to be headquartered outside the UK. I hope that hon. Members will withdraw the amendments.
Finally, new clause 9 seeks to add further annual reporting requirements on the Post Office to cover Northern Ireland, Scotland, Wales and greater London. People throughout the UK, whether they are in Eastbourne or Enniskillen, Aberdeen or Abergavenny, value the role of their local post office. I remind the Committee of our proposed requirements for the annual report on the post office network, which go further than existing statutory duties. Clause 11(2) will require the report to give details of the number and location of the company’s post offices or the network of post offices, whether or not they are owned and operated by the company.
The current annual Postcomm report provides the number of post offices in each region, including the nations—Scotland, Wales and Northern Ireland—and the English regions including London. The Postcomm report also covers what proportion of those post offices are in rural, urban and urban deprived areas. That is exactly the sort of information that we envisage the Post Office will provide when it produces its own report on the post office network. It includes the number and location of post offices and their accessibility, and that is what people want to know about.
Although clause 11 requires the annual report to be laid only before Parliament, it will be a public document, and I have no doubt that it will be sent to the appropriate people in the other Assemblies, authorities and Parliaments across the UK. I hope that hon. Members will agree that our proposed annual report on the post office network not only goes further than the existing statutory duty, but will continue to provide details of the geographic spread of the national network of post offices, broken down as appropriate. It is unnecessary for separate, duplicative reports to be produced for the Government bodies proposed in the amendment. I therefore suggest that hon. Members withdraw new clause 9 and agree that clause 4 should stand part of the Bill.

Nia Griffith: I will sum up briefly, because I do not want to repeat the points that we have discussed. Amendments 26, 29, 30, 27, 28 and 35 all deliver possible means of further scrutiny of the legislation, because we are concerned that the detail about mutualisation is not as good as we would like. We have also brought viability to the Committee’s attention and discussed it at length. We have discussed trying to get more Government business without seeing any sign of it and the worry that commercial business is not taking off. We are disappointed that no post bank was proposed in the latest announcements, and we are, of course, worried that the IBA will not be given a proper 10 or 15-year opportunity.

Edward Davey: I am disappointed that the hon. Lady has responded in that way, because I know that she has with her a copy of our policy statement, which details a lot of the Government services that we propose and the pilots for them. For example, page 23 discusses the potential for the Post Office to become an umbrella organisation to provide an end to the electronic Criminal Records Bureau application service. There are other examples in relation to Jobcentre Plus and national insurance number applications, the provision of an identity verification and registration service that would enable public sector employees to access multiple Government services and so on. I assure the hon. Lady that we intend to put a huge amount of effort into ensuring that Government services and pilots to explore those ideas are taken forward.

Nia Griffith: Well, indeed, but anybody who is running a post office will want to know where the bankable contracts are. They want to see contracts stating exactly how much they are going to get for each type of transaction, because they have to take into consideration the time that those transactions take. They have to run their businesses, so they need proper business contracts. There is a lot of talk and suggestion, but, at the moment, none of that can be taken home by the post office network and banked.
The same is true of local authorities. Many local authorities wax lyrical about their local post offices, but, at the same time, they do not let people pay council tax through them. I had to have a fight to get my council to drop plans to stop people paying their council tax that way. Although there is a lot written in the announcements, the actual problem is the bankable contracts, which people will want to see.
It would be interesting at this point if we turn to what Hooper said:
“Given the social obligations of the Post Office, there is little prospect that the network will be sustained on a fully commercial basis.”
He points out that there are difficulties of viability, and he went on to say:
“We recommend, therefore, that it should remain wholly within public ownership. To ensure that post offices continue to provide a point of access to the universal service, we recommend that there should be a long-term agreement between Royal Mail and Post Office Ltd. We also believe that the post office could enhance the service available to recipients by providing a collection point for parcels and packages.”
He quite clearly had in mind not only the difficulties of making the post office network viable, but the absolutely fundamental nature of the IBA to the post office network.
The other stream that we have looked at is what new business there might be. Although we have some interesting diversification projects on an individual basis, the progress being made towards more commercial-style business is still slow. We have nothing new.

Gordon Banks: Just to reiterate what the Minister has said, Post Office Ltd will have to tender and win any new business that comes via the Government.

Nia Griffith: Indeed. As I have said, we have those fine words and the issues about the pilots, but there is clearly already a problem in that the giro contract may not be given to the Post Office. There are proper tendering processes to go through, which will make it even more challenging for the Post Office.
Clearly, the post office network has to be viable before anybody would want to buy into it as a mutual. That is absolutely essential. We cannot possible think of anybody wanting to get involved in a loss-making organisation. They would want to see something proper on offer.
It was that great American film producer, Sam Goldwyn, who said that an oral agreement is not worth the paper that it is written on. The remnants of a three-year agreement from the Government is like Faustus being tempted by Mephistopheles. In the process of creeping privatisation, three years is as nothing. I say three years because that might be the remnants of an existing IBA—just long enough to tempt in the short term.
In almost every business and profession, there are certain phrases, senses, words and initials the mere mention of which will cause everyone to nod sagely. Outside that business or profession, these words, so sacrosanct to the insider, will have absolutely no resonance. For example, there is the IBA, which is the internal business agreement by which Royal Mail is required to take all its post office counter services from Post Office Ltd. The harsh fact is that, once the current internal business agreement ceases to apply, Royal Mail will be free to use any partner to supply post offices.
One third of Post Office Ltd’s revenue comes from Royal Mail. Without that revenue, Post Office Ltd would be unable to keep many post offices open. That is why the new clauses that we have tabled—new clause 4, which suggests 15 years, and new clause 3, which suggests 10 years—are absolutely critical to the survival of the post office network. With the very greatest of respect to Moya Greene, it is no good simply having fine words. Those fine words need to translate into a proper bankable contract—a proper agreement. Other countries manage to get round these things and put agreements into their legislation, but the real difficulty here is an intense obstinacy not to enshrine in legislation protection for the post office network, which is clearly what many hon. Members want. I suspect that many Members on both sides of the House want the post office network to be made as financially viable and secure as it possibly can be, and without the guarantee of a Royal Mail contract, there is, frankly, nothing to tempt anybody to be involved in a mutual post office network.
It is important that we get these things right and get some indication from the Minister—more than fine words about possible future Government business and possibly developing this pilot project or that project—about a proper IBA guarantee that the post office network will get the business. On that note, I will wind up my comments on this large group of amendments and will take guidance from you, Mr Amess, on how we proceed with each amendment separately in deciding whether to vote.

David Amess: Well, the hon. Lady needs to advise me exactly which amendments she wishes to move. It goes without saying that we will deal with the new clauses much later in our deliberations on the Bill. If she indicates what she would like to vote on, I can give guidance, because some amendments are consequential.

Nia Griffith: The strongest amendment in the group—29, 26 and 30—is clearly 26, so we would like to press that to a vote, and, consequential to that are amendments 27 and 28.

David Amess: I am very happy for the hon. Lady to move amendment 26, but I advise her that if she is unsuccessful, she cannot move amendment 27 or 28. Is she withdrawing amendment 34?

Nia Griffith: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 25, in clause4,page3,line25,at end add—

Question put, That the amendment be made.

The Committee divided: Ayes 8, Noes 9.

Question accordingly negatived.

Clause 4 ordered to stand part of the Bill.

Clause 5

Amendment proposed: 26, in clause5,page3,line33,leave out ‘report’ and insert ‘Bill’.—(Nia Griffith.)

Question put, That the amendment be made.

The Committee divided: Ayes 8, Noes 9.

Question accordingly negatived.

Clause 5 ordered to stand part of the Bill.

Clauses 6 and 7 ordered to stand part of the Bill.

Clause 8

Gordon Banks: I beg to move amendment 32, in clause8,page5,line14,leave out ‘reasonably’.
I promise not to keep the Committee long with an inquiry into a single word, as that is something we have already done. We are asking the Minister for clarification on the word “reasonably” as it appears in the Bill, and we have some honest and straightforward questions about the way the Bill is drafted.
What is reasonable, and who will decide that? I understand that the provision relates to subsection (3) where a company is
“the original holding company or a subsidiary of that company,”
and
“it is wholly owned by the Crown.”
Therefore, I cannot see why the Secretary of State would act unreasonably with such operations. That takes us back to this morning’s debate on amendment 31, and I genuinely seek the Minister’s guidance about what the word “reasonably” adds to the Bill. Will he give us an example of what information he thinks would be reasonable and what he would consider unreasonable? Will he tell us what other assistance the Secretary of State may seek that would be reasonable, and to the same extent, what would be unreasonable? Is that word in the Bill because he envisages the current, or future, Secretary of State acting unreasonably? Will the Minister say what added value there is to the Bill with the inclusion of “reasonably” in its current location?

Edward Davey: This is a probing amendment relating to the Secretary of State’s powers to acquire information or assistance from a company, such as Royal Mail or Post Office Ltd, in connection with making the transfer scheme. I assume that the intention is for the amendment to remove “reasonably” to give the Secretary of State wider discretion in respect of what he might require. The Secretary of State may perhaps at times wish that he could act unreasonably, but he is always under general a public law obligation to act reasonably in taking all decisions, so including “reasonably” in the clause would simply clarify the status quo—albeit that clarification is important.
I hope that I have reassured the hon. Gentleman that there is nothing for him to worry about. “Reasonably” is a standard inclusion confirming the current status quo. I hope that he now feels able to ask leave to withdraw the amendment.

Gordon Banks: I am grateful for the Minister’s response. However, there is a public law obligation on the Secretary of State to act reasonably, so it is strange that the Minister has gone in for a level of double scrutiny in this instance, when he has refused all other kind offers of different levels of scrutiny in other parts of the Bill.
I do not for a moment think that, given the way in which the clause is written, any Secretary of State would ask for unreasonable information. I should have thought that any information that they may ask for, or any assistance that they may have asked for in relation to this matter, would be reasonable and could not therefore be unreasonable. I take the Minister’s contribution as an attempt to clarify the situation and as a double level of scrutiny, which we have tried to install in the Bill at various levels, so I am certainly not going to move that we remove this double level of scrutiny, especially when it has come from the Minister’s own fair hand.
I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 8 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned.—(Mr Newmark.)

Adjourned till Thursday 25 November at Nine o’clock.